Two stocks each currently pay a dividend of $1.50 per share. It is anticipated that both...
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Two stocks each currently pay a dividend of $1.50 per share. It is anticipated that both firms' dividends will grow annually at the rate of 5 percent. Firm A has a beta coefficient of 0.95 while the beta coefficient of firm B is 0.82. a. If U.S. Treasury bills currently yield 5.2 percent and you expect the market to increase at an annual rate of 8.4 percent, what are the valuations of these two stocks using the dividend-growth model? Do not round intermediate calculations. Round your answers to two decimal places. Stock A: $ Stock B: $ b. Why are your valuations different? The beta coefficient of -Select- is higher, which indicates the stock's return is [-Select- volatile. c. If stock A's price were $31 and stock B's price were $52, what would you do? Stock A is-Select- and-Select- be purchased. Stock B is -Select- and-Select- be purchased. Two stocks each currently pay a dividend of $1.50 per share. It is anticipated that both firms' dividends will grow annually at the rate of 5 percent. Firm A has a beta coefficient of 0.95 while the beta coefficient of firm B is 0.82. a. If U.S. Treasury bills currently yield 5.2 percent and you expect the market to increase at an annual rate of 8.4 percent, what are the valuations of these two stocks using the dividend-growth model? Do not round intermediate calculations. Round your answers to two decimal places. Stock A: $ Stock B: $ b. Why are your valuations different? The beta coefficient of -Select- is higher, which indicates the stock's return is [-Select- volatile. c. If stock A's price were $31 and stock B's price were $52, what would you do? Stock A is-Select- and-Select- be purchased. Stock B is -Select- and-Select- be purchased.
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Related Book For
Basic Finance An Introduction to Financial Institutions Investments and Management
ISBN: 978-1111820633
10th edition
Authors: Herbert B. Mayo
Posted Date:
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